As most of the media have reported, the United Nations Intergovernmental Panel on Climate Change (IPCC) has warned that we really only have twelve years to save the planet by fundamentally changing our consumption behaviour. If so I suggest it is time for a radical rethinking of some aspects of taxation.
In 2015 I suggest a Carbon Usage Tax (or CUT) in my book The Joy of Tax. I explained this in my White Paper on Scottish Taxation for Common Weal in 2017 as follows:
A Carbon Usage Tax
- The UK's indirect taxes (VAT and excise duties) plus its system of specific tax charges (BBC licence fee, road fund licences, etc.) are regressive in their impact. The UK needs a progressive indirect tax to rebalance the tax system in addition to the changes already noted under direct taxation. The Carbon Usage Tax (CUT) is intended to achieve that goal and to eventually replace national insurance charges.
- The CUT will be charged on the flow of funds through a person's bank account. The charge will be levied by the bank and will be progressive. For large numbers of people the rate will be set at zero per cent and it is expected that this will remain true even when the CUT replaces national insurance. The rate will, however, be progressive and be applied to all flows into and out of accounts excluding those that are transfers between accounts a person has (e.g. their loan, savings, current and mortgage accounts, including in different banks). Initially charged monthly the CUT would be adjusted to an annual charge at each year-end.
- Resident people who do not appear to have a bank account for CUT purposes or who cannot explain their low rate of bank account usage will be assessed to the tax based on their income.
- The tax is intended to tax higher levels of consumption, as indicated by higher levels of spending, at higher rates. It is intended to reduce that consumption as a result and act as a green tax as well as an eventual replacement for national insurance that discourages job creation, when what should be discouraged is excessive use of the world's resources.
This is, of course, a financial transaction tax. The aim of it would be simple, and fourfold:
- It would capture non-consumption expenditure, which is very largely not liable to VAT and other indirect taxes at present;
- It would discourage excessive consumption by taxing it more highly;
- It would reduce the rate of tax on work by removing NIC over time;
- It would be hard to avoid: using offshore bank accounts would lead to an assessed sum at a penal rate unless voluntary disclosure of flows was made.
The idea will not be popular, most especially with those who are well off. But they are the people most engaged in burning the planet. I believe its time has come.
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Great news for people with wood burning stoves and boilers who collect their own fuel while out walking.
Until wood burning stoves are banned….
This is a good plan. It will be important to get people used to why we are doing it. Years of hapless education and propaganda are stacked against this good sense. I favour a much clearer criminal code as back up to this sensible idea in need of urgent implementation.
Another option could be a carbon ration to each person – calculated on the basis of an average person in the UK and cut by some % sum each year. might be trickier than the tax proposed by Richard – but it would certianly focus minds. Those addicted to ari travel might have a problem.
On a related note, today I attended a conference today on energy efficiency in buildings (& for the curious – I wennt by tram & then on foot) – the European Commission was there – when asked by me how they proposed to fund the colossal numbers of buildings in need of substantial energy renovation they proposed….. private finance.
I despair…..
My view is we should tackle the problem at source, rather end.
Limit the extraction of fossil fuels and let the market decide on price and allocation.
A UN Carbon Limitiation Executive, (UNCLE) could “take-out” extraction not sanctioned by the International body.
Is it maybe time for a global initiative to set about defining Crimes Against the Environment and setting up a World Environment Court? It took WW2 to show a need to define crimes against humanity and, subsequently, a considerable intervening time to set up a global body to bring transgressors to justice.
We don’t have decades to spare on environmental issues and a few high-profile cases might act as a disincentive to others. For starters, how easy would it be to arrest Trump ?
Personally, I find Trump’s honesty preferable to the say-one-thing do-the-opposite of the Democrats
There’s a problem with that
Trump does neither seem to know what he is saying
Or do what he says
So I am not sure he has anyhting to offer with this in the moment honesty
Hi Richard,
Coincidentally I have just finished reading The Joy of Tax (a very thought provoking read) and just this minute watched a documentary (https://www.bbc.co.uk/bbcthree/article/5a1a43b5-cbae-4a42-8271-48f53b63bd07) on the BBC about the impact of the fashion industry on the environment.
Would more targeted taxes on certain forms of expenditure (e.g. a cotton tax that came to mind when watching the documentary) be more effective at steering people away from undesired forms of consumption than the CUT you outline above? I suppose the issue with these sorts of taxes is that they are regressive, but I am struggling to think of a way to square this particular circle.
I suppose maybe a regulatory response combined with tax might work. It seems shocking that part of the saving in getting things manufactured in other countries is a result of low environmental and labour protections – we are shifting things that would not be tolerated in this country to people/countries that “don’t matter”. Perhaps companies should be forced to have their supply changes audited for compliance with satisfactory environmental standards and working conditions; if they fail they are charged a tax on their supply costs. This could be set at a level that meant that it would be more cost effective to be audited and become compliant.
Let’s see how the CC deny brigade respond to this.
While China is cutting back on fossil fuels, she certainly isn’t doing enough to help to solve the expected rise – which I believe is already unavoidable, because of feed-back mechanisms in the world climate. Ditto for India, the second advancing economy. The EU must do more – especially Germany, which is still building lignite-burning power stations. And UK? Stop fracking about!
To expect the US to curb the rapacity of the fossil-fuel producers who help to finance the Republican and Democrat Parties – well, pigs might fly, but even if they did, think of the ordure produced, falling on us all!
All the ideas for cutting consumption, reducing fossil fuel use etc. Will have to happen, although it requires a rethink of the ‘consumption based economy’. My two penny worth idea is a quota for a set number of air miles or journeys issued by government to every adult, per decade, say. Those people who don’t use their quota (elderly, poor, sick, Green,) can sell them on. Business and the widely traveled can buy them. That way wealth is transferred, and people will think twice about flying.
I like that
It would cost me a lot
Some very good points here. Yes one of the responses to climate change must be through the fiscal system and pricing carbon “out of the market”.
A different apporach is to introduced a Carbon Added Tax (CAT). Goods (and services) could be taxed on their embedded carbon content. We have the ability to assess the carbon emissions from any tradable item. We therefore can tax that carbon at an agreed rate to a level that eventually covers the social cost of the emissions.
CAT can be revenue neutral. VAT can be reduced at the same rate that CAT is increased. The tax still has some regressive components but this can be addressed as with CUT – by giving each person a CAT free allowance (or rebate), maybe even as a component of a universal income.
It will clearly signal to a purchaser the embedded carbon they are buying. Carbon intensive goods will be taxed more heavily; those that consume more will pay more tax.
Carbon free (or “carbon-lite”) products will be encouraged.
Happy to discuss in more detail.
Cheers
Have you written it up anywhere?
Cheer up Richard, worse is to come! The Russian curse ‘may you live in interesting times’ is now the barrel we are looking down! I’d always thought finding Trump’s honesty harder than a successful snark hunt or the particle physicists finding something more interesting than the theories they invent. Forgive my ignorance if I am talking to you in another universe …
Stripping any irony away, I favour pretty much everything you say on tax, greening and so on – the mental state of ‘ironic despair’ may well be a very natural consequence of the buffoonery sensible ideas bring out in the supposedly normal world. We owe anyone keeping the real ideas alive plenty. So thanks from me. One of the elephants in the room is “leadership”, something tough to spot in a roomful of headless chickens. Current politicians really don’t want to do much more than swan about at arm’s length from real decisions and hence responsibility. They are lazy, vain adaptive children and one of the biggest nodes of resistance to good thinking like yours is this fatal nexus. My guess is you know all this – but sometimes a show of gratitude is no bad thing.
CUT is almost an ‘attractor’ in a chaos system and could have an effect as comparatively big in our tiny world as the off-universe ‘great attractor’ our mega-structure Laneakea hurtles towards. This will quickly lead to the ‘enemy’ project of fear in which CUT becomes akin to the final wind-up of the LHC before we are sucked into the blackhole. Getting paranoid about tax planning doesn’t sound healthy but I do suggest, much like the drug problem, “the leadership nexus” is best dealt with as a public health issue. We could develop ideas like CUT (and other decent ideas) to working trials. Instead we all work in systems of idiot authority manned by folk theorists likely to be Snollygosters like Trump. Look up Snollygoster and wonder why the term is not in daily use. The big wonder is why we brush off radical change into the revolution blackhole of Sino-Soviet communism so obviously horrible and fail to see the world in a grain of sand. Revolutions are cavalry charges at volcanoes, invitations from sociopaths to be victims in their worlds and worse. Drivel like this quickly smothers ideas like CUT. We have test-beds like CERN and ITER costing billions – yet more or less nothing for social science.
In parts of real science we give up on theorising when our heads bleed and let nature do stuff and watch. This year’s Nobel has gone to such an area. The stuff done was done in a carefully observed tiny portion of our world and applies to all of us through new drugs to treat disease and so on. I believe there are ways to get social science into an empirically adequate situation. Currently it ain’t and good ideas like CUT are left to bodies of decision makers not fit for purpose.
Thanks
Our friends at Common Weal have proposed 10 policies to help mitigate CC, and although tax is not one of them, there’s a lot to agree with: https://www.commonspace.scot/articles/13379/ten-common-weal-policies-help-mitigate-climate-change-now
But the big problem is getting all, or most, countries to act.
This is remarkable –
https://www.facebook.com/VICEAustralia/videos/2143022985727922/UzpfSTEwMDAwNzE0NDYwMTgzMDoyMTU1NzAzNzM0Njc3NzU5/?comment_id=2155772298004236¬if_id=1539103181861383¬if_t=feed_comment
I hope the Labour Party pick this up and the Conservatives for that matter. A solution to the problem of carbon fuel, for all forms of engine, would make a huge contribution to cutting emissions at a stroke. (no pun intended)
At Cons conference, chancellor boasted that fuel duty won’t be raised. Beyond parade!
This is the company website – http://carbonengineering.com/